February 2005
Search    

Handling volatile material pricing | Legal Ease

Legal Ease 4.7 stars4.7 stars4.7 stars4.7 stars4.7 stars

Handling volatile material pricing

by Stephen M. Phillips
Be the first to comment


Roofing contractors have faced challenges recently because of volatile pricing and some material shortages. Although the problem became more acute for roofing contractors midway through 2004, other construction industry trades have been facing the problem for more than a year.

Rising material prices now are a part of doing business and may remain so for the foreseeable future given China's voracious appetite for steel and other construction materials, production shortages and rising transportation costs. Steel prices have been particularly volatile. Prices for copper, aluminum, cement, petroleum, natural gas, wood products and gypsum also have increased dramatically, and spot shortages have been reported.

Although the problem may seem unprecedented to roofing professionals, it is not new. Following the 1973 Organization of Petroleum Exporting Countries (OPEC) oil embargo and political instability in the Middle East during the 1970s and 1980s, gas and oil prices dramatically increased. Unexpected material price increases caused by diverse factors threatened numerous industries. In response to these circumstances, companies that were bound to fixed-price contracts when confronted by steep, unexpected production costs sought legal relief by asking courts to relieve them of their contractual obligations. Various legal theories have been attempted. None have been particularly successful.

The general rule of law is the risk of material price increases in fixed-price construction contracts are borne by the contractor. The fact that performance has become economically burdensome or unattractive is not sufficient legal grounds for performance to be excused. In the absence of a specific contract provision, courts rarely will rule a party is excused or entitled to a price increase because of unexpected, substantial price increases with regard to obtaining materials. If a material is unavailable, courts will be more receptive to reforming a contract compared with when a material can be obtained at a higher...



To read the article in its entirety, please log in or register (registration is free).

Log in or register for FREE access to this article and other Professional Roofing online content.

Not a professionalroofing.net user?

Register now for free access
  • Full access to every article
  • Online Web exclusive information
  • Photo gallery
  • Breaking news
  • Online classified ads

Already a professionalroofing.net user?

Log in now

User name:

Password:

 


Login help
Click here to have your user name and password emailed to you.




Comments (0) Login to post a comment or rating
There are no comments posted.

NRCA NRCA